The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms to comply with the latest stimulus law.
Congress approved the COVID-19 relief package in the month of March and included $284 billion of financing to small businesses in need of loans. The funds were used to reduce the economic burden of the coronavirus epidemic. The law required that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This is to facilitate the application for forgiveness. Additionally, it included conditions that would encourage banks in the community to lend more particularly to minority-owned businesses who had a difficult time getting loans in the past.
“The Small Business Administration met the requirements to release the one-page form for the forgiveness of PPP loans within 24 hours of the date of enactment the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued additional updated forms.”
First Draw PPP Loan forgiveness terms
Loan Forgiveness Warren – For those who qualify, First Draw PPP loans can be qualified for loan forgiveness. This applies when the loan is disbursed within an 8– to 24-week period.
- This is also true for compensation and employees.
- The loan proceeds are used on payroll costs as well as other expenses eligible for reimbursement; and
- At least 60% of funds go to the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to eligible customers are qualified for loan forgiveness when the loan is paid within an 8to 24 week period.
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the identical manner.
- The proceeds of the loan could be used to pay payroll costs or other expenses that are eligible.
- Minimum 60% of profits go towards payroll costs
- How to apply for loan forgiveness and the time to apply
The borrower is eligible for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. The borrower can request forgiveness anytime up to the maturity date of the loan. If they do not file for forgiveness within 10 months of the date of expiration of the covered period the PPP loan payments can no longer deferred, and borrowers will begin making monthly payments to their PPP lender.
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